SANTA CLARA, Calif.—Instrumentation and discovery informatics provider Symyx Technologies Inc. announced in late February its intention to acquire Research Triangle Park, N.C.-based Synthematix, a provider of organic synthesis reaction software systems. This, along with Symyx' November, 2004 purchase of IntelliChem, marks the company's entry into the drug discovery informatics business.

Under the terms of the acquisition, expected to close this month, Symyx will pay $13 million cash to acquire all outstanding shares of privately-held Synthematix, plus an additional potential payment of $4 million over a one-year period based on incremental revenue targets. Symyx will also issue approximately 27,500 options of its Common Stock to unvested Synthematix employees.

Founded as a high-throughput research company for the materials field 10 years ago, Symyx has spent the bulk of its time creating and providing automated workflows in formulation, pre-formulation and process development to the pharmaceutical development sector.

"We found over time that several of our customers in the pharmaceutical industry wanted to integrate our automation software with electronic laboratory notebooks (ELN) from IntelliChem," says Steve Goldby, CEO of Symyx. "We acquired IntelliChem in 2004. Subsequently we learned about Synthematix and its strengths in software to improve the efficiency of discovery chemists in the pharmaceutical industry and felt that was the next adjacent space to the IntelliChem applications. And that is what led us to make the acquisition of Synthematix."

The IntelliChem and Synthematix acquisitions fit the Symyx business model which looks for opportunities not too far a field from its current strengths. "We look for ways to grow our business, but not by dramatically changing what we do," Goldby says. "We look to take logical steps into areas that will serve the same customer base. Given that we were investing heavily and building a customer base in drug development, finding a way to offer solutions in drug discovery was a logical next step."

For Synthematix, the time to sell the company, founded in 2000 and funded by venture firm Catalysta Ventures, had arrived. The company, which produces electronic notebook solutions and software for planning and visualizing chemical reaction pathways, had gained a solid foothold among chemists, according to Clay B. Thorp, chairman of Synthematix and general partner in Catalysta. But like many younger companies, it was faced with the problem of how to leverage that mind share into a rapidly growing business.

"We had built the company to the point of gaining notice and recognition in the industry among discovery chemists," says Thorp. "But we had gotten to the point of wanting to invest in growth."

In mid 2004, the Synthematix Board of Directors charged the management team with finding a method of spurring that growth through additional capital, partnerships or the outright sale of the business. Symyx proved an interesting acquirer since it had recently purchased Synthematix competitor IntelliChem. "We were familiar with the company and felt that Symyx could successfully integrate all of the pieces of both acquisitions effectively," says Thorp.

Further, 19-employee Synthe-matix figured to benefit greatly from Symyx' reach in the industry via its large sales staff. "We only have one salesperson on staff, though in a lot of ways we all are salespeople for the company," says Thorp. "We figured that they provided the best path for our ultimate success."

Once the sale is closed, Thorp will stay on only in an advisory capacity with Synthematix. But Goldby says Symyx plans to keep the operation in North Carolina. "Typically, these kinds of companies are performance-based organizations and the strength and success of the business is dependent on the people," Goldby says.

While the IntelliChem and Synthematix acquisition occurred within mere months of each other, Goldby maintains Symyx's acquisition appetite in the drug discovery market may be waning in the near term. "Right now we are going to work to integrate these two acquisitions and to focus on drug discovery by building these two businesses," he says.